Here’s to consolidate some things that have been scattered in other threads …
First of all, take five minutes and look at the Governor’s video presentation. (Thanks to GoldsteinGoneWild.) As noted, it’s rather like a high-school educational film, but helpful, with graphs and explanations by A&F chief Leslie Kirwan and co.
As David mentioned, the Mass. Budget and Policy Center have issued their comments, with brief explanations of various areas of the budget.
Interesting to me is this run-down of the oh-so-controversial closing of corporate tax loopholes. Anyone out there want to defend this litany?
Along with the budget, the Governor filed legislation to reduce corporate tax avoidance by approximately $295 million in FY 2008. MBPC recently released a Facts at a Glance report showing that business taxes in Massachusetts are currently among the lowest in the nation (available at http://www.massbudge…). The tax legislation accompanying the budget closes corporate tax loopholes in several ways:
- implementing combined reporting so that companies cannot shift income between subsidiaries to reduce their taxes (see http://www.massbudge… CombinedReportingFeb07.pdf for a more complete explanation of combined reporting);
- conforming to federal rules so that companies cannot avoid taxes by being classified as partnerships in one state and corporations in another state;
- requiring that businesses owned by insurance companies pay the same taxes as other businesses;
- prohibiting corporate taxpayers from placing real estate in a subsidiary entity and selling that entity rather than the real estate itself to avoid the real estate transfer tax;
- ensuring that internet sites that sell hotel rooms remit the sales tax on the full cost of the rooms they sell (rather than on the wholesale price they pay to the hotels);
- reducing the ability of businesses to lease equipment from their own subsidiaries to avoid paying the full sales tax upfront.
Yeah, we just gotta keep those, huh? In fact, we have to keep raising property taxes for poor and middle-class folks just to do so, right?
gary says
Combined reporting is the biggest of the Corporate tax increases.
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Maybe there’s a reason that only 17 states have adopted it and of those, only 1 in the past 20 years. combined reporting
gary says
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How unfair!
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How about this example. Charlie arranges, say a wedding. Calls up the Hilton and books 50 rooms for friends and family and the hotel cuts him a break, because of the volumn. Instead of the $150 per night, Charlie gets them for $125.
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Charlie (you entrepenuer you) takes cash from friends for $135, for his time and hard work, and of course pays income tax on the gain of $10 per room.
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DOR says, Charlie you don’t owe us any sales tax but under the new proposal you’ll owe us sales tax on the $10 gain per room.
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Wait! Says Charlie, I didn’t sell anything! How can I owe a sales tax.
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It’s the law.
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Fair? Maybe, maybe not.
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A loophole. Hardly.
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My gripe with this proposal isn’t whether it’s fair or not. It’s the dishonest depiction of it being a ‘loophole’ in the first place.
charley-on-the-mta says
You pay the sales tax based on retail, not wholesale. Simple.
gary says
I never said it wasn’t fair. I said it’s not a loophole.
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Sites like Orbitz don’t purchase rooms from hotels in advance. And, they don’t sell them. The hotel offers them rooms at a volumn discounted rate, and charges a service fee for finding a customer to use it.
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Politicians decide what’s fair and if they want to apply sales tax to Orbitz mark-ups, it’s a political decision, but don’t lie to me and pretend you’re closing a loophole.
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raj says
reducing the ability of businesses to lease equipment from their own subsidiaries to avoid paying the full sales tax upfront.
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I hadn’t thought of that tax dodge.
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Quite frankly, I’d be interested in having the state insisting that credit card companies provide transactional information to the state so that they could charge “use tax” (equivalent of sales tax) to MA state residents who buy products in New Hampshire, Rhode Island, or Connecticut. It would then be up to the MA state residents to provide some evidence that the products were not imported into MA.
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I’m very serious about that. MA should get serious about enforcing its “use tax” laws
gary says
Line 33 of your Mass tax return allows you to declare and pay the use tax you didn’t pay by purchasing out of state.